Finshodhan 2

OIL AND GAS SECTOR

CONTENTS
Executive Summary India at advantage O&G Various Segments with stats Key Players M&A Activity Growth Drivers Opportunities Recent News Conclusion

EXECUTIVE SUMMARY
Worlds fourthlargest energy consumer Indias energy demand is expected to double to 1,464 Mtoe by 2035 from 559 Mtoe in 2011. Moreover, the countrys share in global primary energy consumption would increase twofold by 2035

Fourth-largest consumer of oil and petroleum products

Oil consumption is estimated to reach 4.0 mbpd by FY16, expanding at a CAGR of 3.2 per cent during FY08FY16F

Sixth-largest LNG importer in 2011

LNG imports accounted for about one-fourth of total gas demand. India's gas demand is estimated to more than double over the next five years

Notes: Mtoe - Million Tonnes of Oil Equivalent; mbpd - Million Barrels Per Day

INDIA AT ADVANTAGE
Growing Demand India is the worlds fourth-largest energy consumer; oil and gas account for 37.3 per cent of total energy consumption Skilled workforce About 140,000 people were employed in the petroleum industry at the end of FY12 Policy support Government has enacted various policies such as the New Exploration Licensing Policy and Coal Bed Methane

INDIA

Supportive FDI guidelines 100 per cent Foreign Direct Investment (FDI) is allowed in upstream and private sector refining projects

O & G VARIOUS SEGMENTS

The country has 5.6 billion barrels of proven oil reserves, with an average oil production of 0.8 mbpd (2012) India has 1,330 bcm of gas reserves and produced 47.6 bcm of gas in 2012 Backed by new oil fields, domestic oil output is anticipated to grow to 1.0 mbpd by FY16 In FY12, imports accounted for approximately 81 per cent of the countrys total oil demand
Upstream segment - Exploration and It is the largest upstream company in the exploration and production (E&P) segment, accounting for approximately 62 per cent of the countrys total oil production output
The upstream segment is dominated by the state-owned ONGC

IOCL operates a 11,163 km network of crude, gas and product pipelines, with Midstream a capacity of 1.6 mbpd segment Storage and transportation This is around 30 per cent of the nations total pipeline network

Downstream segment Refining, processing and marketing

IOCL is the largest company, operating 10 out of 22 Indian refineries Reliance launched Indias first privately owned refinery in 1999 and has gained a considerable market share (28 per cent)

Notes: bcm Billion Cubic Meters ; mbpd Million Barrels Per Day;

SOME STATS
With India developing gas-fired power stations, consumption is up more than 160 per cent since 1995 Domestic production accounts for more than three-quarters of total gas consumption in the country Imports constitute the rest; in 2012, the share of imports was 22.0 per cent India increasingly relies on imported LNG; the country was the sixth-largest LNG importer in 2011 and accounted for 5.3 per cent of global imports Total crude oil production was 38.0 mmt during FY12 ONGC, the largest crude oil producer in country, accounted for 62 per cent of total crude oil production in India As Per Aranca Research, Demand is not likely to simmer down any time soon, given strong economic growth and rising urbanisation; during FY200817F, gas consumption is likely to expand at a CAGR of 21.0 per cent Backed by new oil fields, domestic oil output is anticipated to grow to 1.0 mbpd by FY16 from 0.8 mbpd in FY12 Indias LNG imports are forecast to increase at a CAGR of 33 per cent during 201217

Notes: * Provisional; mmt Million Metric Tonne, mmtpa Million Metric Tonnes Per Annum

KEY PLAYERS
Domestic Players
Company Indian Oil Corporation Limited Reliance Industries Bharat Petroleum Corporation Limited Hindustan Petroleum Corporation Limited ONGC GAIL India Limited Oil India Limited Ownership FY13 Turnover (USD billion) 78.9 per cent state-owned 84.7 Public Listed 73 54.9 per cent state-owned 44.5 51.1 per cent state-owned 39.7 69.2 per cent state-owned 29.7 57.3 per cent state-owned 9.4 68.4 per cent state-owned 1.8

International Company Players

Cairn Energy India Pvt Shell BG Group BP

Ownership (per cent) Private Sector Private Sector Private Sector Private Sector

Global Turnover (USD billion) 3.2 (FY13) 460.0 (1Q2013) 20.8 (1Q2013) 370.9 (1Q2013)

AND THEIR MARKET SHARE (%)

3% 2%

Product pipeline network by length

6% IOC 15% 55% HPCL BPCL OIL PCCK

19%

PMHB

India's total refining capacity

7%
9% 26% IOC BPCL HPCL CPCL

27% 7% 7% 6% 1%

10%

NRL MRPL RPL EOL

RECENT MAJOR M&A ACTIVITY

Date Announced
Nov 2012 Nov 2012

Acquirer Name
ONGC Videsh Inpex Corp

Target Name
ConocoPhillips (Kashagan Field) ONGC Exploration Block KG-DWN2004/6 Hess Corp (Azrei oilfield) Reliance Industries Ltd. Cairn India Ltd. Cairn India Ltd. Infotel Broadband Svcs Ltd Republic of Venezuela-Carabobo

Value of Deal (USD Mn)

5000 Not Disclosed

Sep 2012 Feb 2011 Aug 2010 Aug 2010 Jun 2010 Feb 2010

ONGC Videsh BP PLC Sesa Goa Vedanta Resources PLC Reliance Industries Ltd. Investor Group

1000 9000 1180.8 6568.5 1026.7 4848

GROWTH DRIVERS
Robust domestic market; expected to expand Increasing demand for natural gas

India is the worlds fourth-largest energy consumer The country accounted for 10.3 per cent of total demand for gas in Asia-Pacific in 2011 Several industries are increasing the usage of natural gas in operations pulp and paper, metals, chemicals, glass (Main Industries) The nation has large coal, crude oil and natural gas reserves Oil reserves amounted to 5.6 billion barrels in FY12 Natural gas reserves stood at 1.3 tcm in FY12

Abundant raw material

Investments worth USD75 billion is expected across the oil & gas value chain under the 12th Plan (201217) Huge investments Since April 2000, FDI worth USD5.4 billion has been invested in Indias petroleum and natural gas sectors 100 per cent FDI allowed in E&P projects/companies; 49 per cent allowed in refining Favourable policies New Exploraton Licensing Policy(NELP) & Coal Bed Methane (CBM) Several domestic companies (such as ONGC, have Natural gas reportedly found natural gas in deep waters discoveries This offers significant expansion opportunity for the next decade Note: TCM - Trillion Cubic Meters, E&P - Exploration and Production

OPPORTUNITIES
Upstream segment Midstream segment Downstream segment

Locating new fields for exploration: 78 per cent of the countrys sedimentary area is yet to be explored Development of unconventional resources: CBM fields in the deep sea Opportunities for secondary/tertiary oil producing techniques Increased demand for skilled labour and oilfield services and equipment

Expansion in the transmission network of gas pipelines LNG imports have increased significantly; this provides an opportunity to boost production capacity In light of mounting LNG production, huge opportunity lies for LNG terminal operation, engineering, procurement and construction services

Development in city gas distribution (CGD) networks, which are similar to Delhi and Mumbais CGDs To construct new refineries considering advantages such as low operation costs, lesser freight charges and favourable policies Expansion of the countrys petroleum product distribution network

SHALE GAS PROSPECT OF INDIA

India has 63 tcf of recoverable shale gas reserves The Cambay, Krishna Godavari, Cauvery, and the Damodar Valley are the most prospective sedimentary basins for carrying out shale gas activities in the country Around 20 tcf of gas has been classified as technically recoverable reserves in the Cambay basin in Gujarat (the largest basin in the country), spread across 20,000 gross square miles with a prospective area of 1,940 square miles It is estimated that the Krishna Godavari (KG) basin encloses a series of organically rich shales, containing around 27 tcf of technically recoverable gas. KG basin, located in Eastern India, holds the countrys largest shale gas reserves, extending over 7,800 gross square miles with a prospective area of around 4,340 square miles India is likely to launch bidding for shale gas exploration toward the end of 2013 In April 2012, the Directorate General of Hydrocarbons (DGH) submitted its draft policy on exploitation of shale gas to the Ministry of Petroleum and Natural Gas

Notes: tcf Trillion Cubic Feet

RECENT NEWS

RIL slapped with a fine of USD 800 mn for failing to produce expected amount of gas Price of petrol is falling while diesel price is rising. Since Jan13 the government raised diesel prices recently for the 10th time Kuwait, Qatar & UAE eye stake in ONGC petchem project News of recent tension in Syria leads to rise in crude prices

CONCLUSION

The sector presents great opportunity for economic growth of the country. Increase in exploration activity can help in finding new reserves. Reducing the price and currency pressure in the economy by reducing the dependence on imports. Government policy needs to be uniform and clearly stated. Recent case of RIL vs. the state sour investor sentiment for the sector. Rise in investment crucial for growth in the sector.

SOURCES
BP Statistical Review, June 2012 BMI forecasts http://petroleum.nic.in/ World Oil Outlook 2012 US Energy Information Administration (EIA) Crisil Research

THANK YOU

YOGESHKUMAR MUNDADA BHUVANESH KUMAR